6 Ways Construction Companies Can Be Successful and Profitable in a Challenging Market

No matter how big or small your construction company is, managing it during challenging times requires careful planning, adaptability and a proactive approach. The contractor’s preparation and decision-making determine whether their business will thrive or fail. While each and every company is unique, here are six fundamentals that need to be considered in order to be profitable and thrive.

1. Update your business plan with a recession in mind

While no business plan is recession-proof, it’s important to proactively look at your business plan. You may need to make changes or ensure you have the ability to change direction during the year. Staying informed about the latest industry trends will help you understand what type of projects could be on the horizon. You can do this in a number of ways, including doing your own research, listening to state-of-the-industry webinars from industry experts and talking regularly with your customer base to get feedback on what types of jobs they are proposing on. Having the ability to diversify your services is also important. For example, if you focus on new construction, but that is slowing down, you can also look at rehab projects of existing buildings, roads, parking lots, etc.

It's also important to stay informed of federal funding and how inflation is affecting those projects and their profitability. While there is a lot of infrastructure work planned through the Federal Infrastructure Investment and Jobs Act, less than 5% of contractors have seen bidding activity on projects through this bill. While it is expected that more projects will come to fruition in 2023 and 2024, you must look at how inflation is affecting the profitability of your current projects and your future projects.

2. Hire and retain key employees

It’s of utmost importance to invest in your employees since they are your most valuable asset. Investing in them can be done through a multitude of avenues. Knowing what your company can realistically do and getting feedback on what your employees really want will ensure you are providing what matters. Some things you could do include:

• Reevaluate your training and development programs: Employees typically stay longer when they see a clear path into what their future could look like. With many trained laborers aging out of the industry, it’s important not just for your company but for the industry as a whole to make sure you are putting in the time and effort to train your workers. Your goal should be to train them well enough that they could leave but treat them well enough so they want to stay.
• Educate younger generations on career opportunities: Many students, both male, and female are not aware of the career opportunities within the construction industry. Spend time educating high schoolers and their parents on what the industry can offer them. This can be done through career fairs, partnerships with schools, etc. For best results, bring in staff who are more relatable to the students like younger employees with similar backgrounds.
• Review your benefits: Have you updated your benefits lately? Is there room for improvement? While competitive pay is a top attraction, job satisfaction and loyalty can also come from offering innovative benefits such as incentive bonus programs, extra paid time off, more flexibility with working from home for office workers or providing online training for field workers, 401k and employee appreciation events. Also, educate your employees on what they are getting. One way to do this is to show benefits on their paycheck, like fuel allowances.
• Focus on safety: To attract and retain talent you must be realistic about the job and the conditions, however, it’s also important to focus on the safety of your employees. You want to ensure they are not putting their life on the line just to work for you.

Keep in mind that certain fringe benefits need to stay recession-proof—it could be more harmful to take away something you already offer.

3. Leverage digital technology and automation

Digital technology and automation can make your business more productive in the field and in the office. For example, Shelby Erectors, an industry-leading rebar contractor, has implemented robotics on its projects to decrease the amount of hard physical labor on its employees and increase performance. Other technology, like Deltek ComputerEase, is helping similar businesses get into the nitty-gritty details of their jobs, productivity and performance.

There is an increasing amount of new technology and construction software being used in the construction industry, which helps attract younger generations. However, it’s also important to understand the technology you already have in place. For example, Microsoft Office 365 has many capabilities like Teams, Planner and Power BI that can help your company.

4. Get to know your lenders and evaluate your bank

It’s common knowledge that lenders and banks want to give you money when you don’t need it but won’t give you money when you do need it. By getting to know your lenders and bank you can build a relationship with them so they understand your company and the full story of why you’re asking for money—instilling confidence in the company. Rather than just reviewing numbers, have them participate by talking them through current and future decisions the company is going to make so they can understand where the company wants to go as an organization. You will also want to evaluate your bank to ensure they are construction-friendly and if you are getting the service you need. If you want a dedicated person that will pick up the phone, perhaps a smaller, local bank would be a better fit than one of the big banks.

5. Adapt your marketing plan

Are your current marketing efforts working? Is there a new way to market that you have not yet tried? Consider refreshing your marketing plan to bring in more work or new clients. A strong online presence with an easy-to-navigate, updated website is crucial. Social media presence can also be an easy, yet impactful way to market your company. Determine the best platform(s) to use and how to use them effectively by researching your market and analyzing your competition.

6. Network and join industry organizations

Networking and joining industry organizations is another great way to invest in your business and market. Joining different types of associations can also be beneficial—ranging from local, national and market-specific chapters. Many organizations have created peer group forums for non-competitors to bounce ideas off of each other on how they are handling situations like per diems. Professional organizations can also help with education on certain topics. Construction Financial Management Association (CFMA), for example, has created a “Hey CFMA” Youtube channel that answers common financial questions in the construction industry with helpful tips and tricks. NAWIC, or National Association of Women in Construction, was specifically created for women to network and support other women in the male-dominated industry.

As you can see, managing a construction company in a challenging market requires a proactive approach to staying successful and profitable. With the right strategies and mindset, you can overcome obstacles and thrive even in the toughest conditions.